By Thomas Grove
ISTANBUL, Dec 8 (Reuters) - Turkey's Standard Unlu, eyeing
government infrastructure spending ahead of 2011 polls, will buy
cement stocks and plans to sell Turkish T-bills as central bank
interest rates are set to rise from their current historic lows.
Standard Unlu, majority-owned by South African Standard Bank
<SBKJ.J>, will stay underweight in banks which fund manager
Ismail Erdem said are set to underperform the finance-heavy
Istanbul Stock Exchange in 2010.
Interest rates are expected to rise as Turkey most likely
comes out of recession in 2010, and the central bank will have
to deal with spikes in inflation.
"Interest rates are likely to go up (next year). They
already bottomed out and this can lead to underperformance in
bank shares compared to industrials," said fund manager Erdem.
He said he liked cement shares, especially Sabanci Holding
<SAHOL.IS>-owned Cimsa <CIMSA.IS>.
Turkish banks have enjoyed hefty returns on loans this year
taking advantage of central bank rate cuts to 10.25 percent
since November last year.
Standard Unlu, which manages $25 million or nearly 40
million lira, has a 75-25 percent split between equities and
Treasury bills. Their fund has grown some 65 percent this year,
lower than a rise of near 85 percent for the Istanbul top 100.
Erdem sees cement stocks making up 10 percent of the fund's
equity assets. Cimsa has said previously that it is looking at
possible acquisitions abroad [].
"We haven't bought any major cement positions yet, but
that's a sector we are looking at and we are very optimistic. We
will add positions, we will buy cement stocks," he said.
Infrastructure and housing projects in 2010 will boost the
sector's activity ahead of the 2011 polls [].
"We have (parliamentary) elections in 2011, and in an
election year government spending goes up, and government
spending in terms of infrastructure goes up before elections.
That is a natural trigger for cement consumption," said Erdem.
COALITION
Politics will remain a risk in 2010, especially given the
possibility of the ruling pro-business AK Party's single-party
rule coming to an end, forcing a coalition government, he said.
The last coalition government is blamed in part for the
country's last financial crisis in 2001. The AK Party has
enjoyed an average of 7 percent growth between 2002 and 2007.
Turkish economic growth in 2010 will also boost power
demand, making the energy sector an attractive target, said
Erdem, who puts the sector equity asset valuation at 15 percent,
well above the sector's weighting in the ISE.
He said he likes Ak Enerji <AKENR>, partly-owned by Czech
Cez <>, and Zorlu Enerji <ZOREN.IS>. Turkish companies
are expecting higher profit margin hydroelectric plants to come
on line next year.
Turkey's bourse, which saw strong growth this year, making
it among the biggest risers among its emerging market peers,
will strengthen between 15 and 20 percent in 2010, he said.
